[ Nippon Keidanren ] [ Journal ]
Messages from "Economic Trend", August 2003

Urban Revitalization

Osamu Hirashima
Vice Chairman of the Board of Councillors, Nippon Keidanren
Chairman of the Board, Taisei Corporation

Not long after the inauguration of the Koizumi Cabinet in 2001, the Urban Renaissance Headquarters (URH) was set up with Prime Minister Koizumi appointed to serve as its head. The mission of this organization is to promote intensive urban social infrastructure development and bring about urban revitalization in the interest of eliminating the negative legacies of the last century and enhancing the appeal and international competitiveness of the urban centers that serve as the wellspring of Japan's vitality.

The URH is striving to help Japan achieve economic revitalization by channeling private-sector resources (capital and expertise) into the cities to stimulate fresh demand and boost that of the private sector. In addition, the URH aims to contribute to the disposal of non-performing loans through the enhancement of real estate liquidity.

Drawing from a variety of perspectives on the environment, disaster prevention, and internationalization, the URH has worked hard in the two years since its inception. It has finalized plans for a number of projects aimed at creating new urban areas for the 21st century; it has designated priority urban redevelopment areas that will strive to foster private investment in urban redevelopment with bold incentives that define limits on development periods and locations; it has set up an Urban Renaissance Fund; and, in addition, it has implemented emergency measures and other comprehensive policies for urban revitalization nationwide. Thanks to those efforts, the stage for progress in the urban revitalization arena is almost set, and in the years ahead, emphasis will focus on nurturing closer collaboration between the public and private sectors at the local level and putting actual projects into motion.

Nonetheless, many issues remain unresolved. They include fatigue in the private economy, questions about the way private finance initiatives (PFIs, see note below) should be harnessed as an effective vehicle for urban revitalization, and the task of balancing the expectations of vested interests with the principles of the Land Expropriation Law.

Recently, public attention has been drawn to the clusters of high-rise buildings springing up in and around downtown Tokyo, including the Shiodome, Shinagawa, Marunouchi, and Roppongi areas. However, most of these projects were completed under the constraints of former regulatory frameworks for redevelopment. Roppongi Hills, for example-a massive project on an 11-hectare site with 724,000 m2 of total floor-space-was designated a redevelopment inducement area by the Metropolis of Tokyo in 1986, and in fact it took a full 17 years to bring it to completion.

The true value of the URH will be measured in terms of the success it demonstrates in facilitating future urban redevelopment projects and alleviating the associated time risks by ensuring that such projects are not hampered by the traditional drawn-out construction schedules of former years.

In view of the many congested areas of metropolitan Tokyo in dire need of redevelopment (some 6,000 ha combined), and the current (approximately 20 percent) completion rate for the metropolitan loop-road network, which will be an essential infrastructural backbone for future urban redevelopment efforts, the government needs to take some bold steps in the area of regulatory reform, including action to revise the Land Expropriation Law.

Note on private finance initiatives (PFIs)
PFIs comprise a strategy for the construction, maintenance, and operation of public infrastructure that couples the financial might, managerial expertise, and technological prowess of the private sector with steps in administrative deregulation and the provision of government incentives. PFIs were adopted in the United Kingdom in the early 1990s for the express objective of boosting the efficiency of public-sector enterprises. In September 1999, Japan inaugurated a similar framework under provisions of its PFI Promotion Law, and the government has since announced plans for the implementation of as many as 100 new projects under that framework.
Although the PFI strategy is finding wider application, concerns have arisen regarding a number of issues, including the limited scope of fields where the private sector's strength and creativity can be utilized, delayed construction fee payments, balanced public-private risk-sharing, and the multi-tiered nature of the contractor selection process.

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